South Sea Baubles has the following (incomplete) balance sheet and income statem
ID: 2813313 • Letter: S
Question
South Sea Baubles has the following (incomplete) balance sheet and income statement.
a&b. What is shareholders’ equity in 2015 and 2016? (Enter your answers in millions.)
c&d. What is net working capital in 2015 and 2016? (Enter your answers in millions.)
e. What are taxes paid in 2016? Assume the firm pays taxes equal to 35% of taxable income. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
f. What is cash provided by operations during 2016? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
g. Net fixed assets increased from $990 million to $1,090 million during 2016. What must have been South Sea’s gross investment in fixed assets during 2016? (Enter your answer in millions.)
BALANCE SHEET AT END OF YEAR (Figures in $ millions) Assets 2015 2016 Liabilities and Shareholders' Equity 2015 2016 Current assets $ 109 $ 235 Current liabilities $ 88 $ 117 Net fixed assets 990 1,090 Long-term debt 695 940Explanation / Answer
a&b. What is shareholders’ equity in 2015 and 2016?
shareholders’ equity = Total Assets - Total Liabilities
shareholders’ equity in 2015 = (109+990) - (88+695)
= 1099-783
= 316
shareholders’ equity in 2016 = (235+1090)+(117+940)
= 1325-1057
= 268
c&d. What is net working capital in 2015 and 2016?
Net Working Capital = Current Assets - Current Liabilities
Net Working Capital for 2015 = 109-88
= 21
Net Working Capital for 2016 = 235-117
= 118
e. What are taxes paid in 2016?
f. What is cash provided by operations during 2016?
Cashflow from operations = EBIT+ Depreciation - Taxes + changes in working capital
changes in working capital comprises of
Negative Change in current assets are added and Negative Change in current liabilities are deducted
Cashflow from operations = 475+445-75.60+126-29
= 941.40
g. What must have been South Sea’s gross investment in fixed assets during 2016?
Gross Investment = Net investment + Accumulated Depreciation
Net fixed assets on 2015 = 990
Dpreciation for 2016 = 445
Net fixed assets on 2016 = Net fixed assets on 2015 + Addition during 2016 - Dpreciation for 2016
Addition during 2016 = Net fixed assets on 2016 - Net fixed assets on 2015 + Dpreciation for 2016
= 1090 - 990+445
= 545
Depreciation Rate = 445/(990+545)
= 445/1535
= 29%
Gross Investment in 2015 = 990 / (1-.29)
= 990/.71
=1394
Gross Investment in 2016= Gross Investment in 2015 + Addition during 2016
= 1394+545
= 1939
Revenue 2,045 Less: Cost of goods sold 1,125 Gross profit 920 Less: Depreciation 445 EBIT 475 Less: Interest 259 Income Before Income Tax (EBT) 216 Less: Income Tax@35% 75.60 Net Income 140.40Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.